Glossary

A

Actuarial Value (AV) — The percentage of total average costs for covered benefits that a plan will cover. For example, if a plan has an actuarial value of 70 percent, on average, you would be responsible for 30 percent of the costs of all covered benefits. However, you could be responsible for a higher or lower percentage of the total costs of covered services for the year, depending on your actual health care needs and the terms of your insurance policy. The percentage a plan covers can be described as Bronze (60%), Silver (70%), Gold (80%), or Platinum (90%).

Adverse selection — Adverse selection occurs when insurers must cover high-risk members, who tend to use their insurance benefits more. Health insurance is most efficient when risk is shared among large numbers of members. In large, diverse populations, healthy members offset the costs of unhealthy members.

Affordable Care Act (ACA) — The comprehensive health care reform law enacted in March 2010. The law was enacted in two parts: The Patient Protection and Affordable Care Act was signed into law on March 23, 2010, and was amended by the Health Care and Education Reconciliation Act on March 30, 2010. The name “Affordable Care Act” is used to refer to the final, amended version of the law.

Affordable coverage — Affordable coverage under the Affordable Care Act indicates employers must offer insurance that covers at least 60 percent of costs. In addition, an individual employee's premium cannot exceed 9.7 percent of their household income. If the coverage offered does not meet the affordability standard, employees may receive tax credits to purchase insurance on their own through a Health Insurance Marketplace.

Applicable Large Employer — An employer who employs, on average, 50 or more full-time (FT) or full-time equivalent (FTE) employees.

Auto-enrollment — Employees of an organization can be automatically enrolled in insurance as a default. Some level of insurance is provided without the employee making decisions. To avoid coverage, individuals would have to proactively opt out of coverage. Auto-enrollment provides a convenient way to ensure that employees do not miss an opportunity to participate in a health coverage plan.

B

C

Cadillac Tax — Beginning in 2022, this tax of 40 percent will be imposed on any “excess benefit” provided to employees enrolled in “high-cost” employer-sponsored coverage.

Catastrophic Plan — Reduced-cost benefit plan that protects against high out-of-pocket costs but does not provide comprehensive coverage for Essential Health Benefits. This type of plan is available to people under age 30 and those who cannot afford to purchase Qualified Health Plan coverage.

Community rating — A rule that prevents health insurers from creating various premiums within a geographic area based on age, gender, health status, or other factors.

Copayment — A fixed charge that you must pay for a covered health care service, usually at the time you receive the service.

Cost Sharing — The share of costs for covered services that you must pay out of your own pocket. This term usually includes deductibles, copayments, and co-insurance.

Cost Sharing Reduction (CSR) — A discount that lowers the amount you have to pay for deductibles, copayments, and coinsurance. In the Health Insurance Marketplace, cost-sharing reductions are often called “extra savings.” If you qualify, you must enroll in a plan in the Silver category to get the extra savings.

F

Fair Labor Standards Act — The Fair Labor Standards Act provides compensation standards. These standards relate to issues such as wages, minimum wages, child labor, and overtime pay. The Act also indicates companies and individuals who are exempt from the standards.

Federally-Facilitated Exchange (FFE) — A Health Insurance Marketplace operated primarily by the federal government for consumers who live in a particular state.

Flexible spending account (FSA) — An arrangement elected through your employer to pay for many of your out-of-pocket medical expenses—such as copayments—with tax-free dollars. You decide how much of your pre-tax wages you want taken out of your paycheck and put into an FSA (up to the IRS limit). Generally, FSA funds do not “carry over” from one plan year to the next, unless your employer has established a rollover feature. This means that your employer’s FSA plan may permit you to rollover up to $500 into next plan year. Or your employer may establish a grace period which permits you to use unspent FSA funds for expenses incurred 2.5 months after the end of the FSA plan year.

Full-time (FT) employee — An employee who works on average 30+ hours per week.

G

Grandfathered health plans — The Affordable Care Act exempts most plans that existed on March 23, 2010 — the day the law was enacted — from some of the law's consumer protections. This preserves consumers' rights to keep the coverage they already had before health reform.

Guaranteed issue — A requirement that health plans must permit you to enroll regardless of health status, age, gender, or other factors that might predict the use of health services. Except in some states, guaranteed issue doesn't limit how much you can be charged if you enroll.

H

Habilitative services — Health care services that help a person keep, learn, or improve skills and functioning for daily living. Examples include therapy for a child who isn't walking or talking at the expected age. These services may include physical and occupational therapy, speech-language pathology and other services for people with disabilities in a variety of inpatient and/or outpatient settings.

Health Insurance Marketplace — A transparent and competitive insurance marketplace where individuals and small businesses can buy affordable and qualified health benefit plans. The Marketplace offers you a choice of health plans that meet certain benefits and cost standards. In 2014, members of Congress began getting their health care insurance through the Marketplace as well as all uninsured Americans. In 2014, members of Congress began getting their health care insurance through the Marketplace as well as all uninsured Americans.

Health savings account (HSA) — A special tax-advantaged savings account designated for qualified medical expenses. To be eligible to open and make contributions to the HSA, you must be covered by a qualified high-deductible health plan (QHDHP). Employees own their HSA at all times and the account is portable. That means you can take the account with you when you change medical plans, change jobs, or retire. However, you have to be covered under a QHDHP in order to make contributions.

High deductible health plan (HDHP) — A health insurance plan with a minimum deductible that must be met before the health plan begins to pay. The minimum deductible for a plan to be categorized as an HDHP varies each year as determined by the Internal Revenue Code (IRS). Being covered by a HDHP is also a requirement for having a health savings account.

Household income — Modified adjusted gross income of the employee and any members of the employee's family (including spouse and dependents) who are required to file an income tax return.

I

J

K

L

M

Medical loss ratio (MLR) — The percentage of your premium dollars that an insurance company spends on providing you with health care and improving the quality of your care versus how much is spent on administrative and overhead costs.

Minimum essential coverage (MEC) — The type of coverage an individual needs to have to meet the individual responsibility requirement under the Affordable Care Act. This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE, and certain other coverage.

Minimum value — Coverage in which the plan's share of the total allowed costs of benefits provided under the plan is at least 60 percent of such costs.

N

National health expenditures — The nation's spending on health care is compiled annually in the Report of National Health Expenditures. The report is developed by the Centers for Medicare & Medicaid Services. For example, the report indicated that health spending grew at a rate of 3.9 percent in 2011.

O

Open enrollment period — The period of time when people can choose a new health plan. This usually occurs once a year.

Out-of-pocket maximum— The most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100 percent of the allowed amount. This limit never includes your premium, balance-billed charges, or health care your health insurance or plan doesn't cover. Some health insurance or plans don't count all of your copayments, deductibles, coinsurance payments, out-of-network payments, or other expenses toward this limit. In Medicaid and CHIP, the limit includes premiums.

P

Partnership Exchange — A Health Insurance Marketplace that is jointly operated by a state and the federal government.

Patient Centered Outcomes Research Institute (PCORI) — A non-profit organization funded by the U.S. government to support scientific research on the effectiveness of certain medical treatments or procedures.

Premium — The specific amount charged to covered groups and individuals. An individual or their employer normally pays this monthly or yearly. Depending upon a number of different variables, actual premiums for covered individuals and groups may be higher or lower than a filed rate. (A premium is sometimes confused with a rate.)

Preventive service — A recommended routine health care service or screening that may be covered at no cost to you by your health plan.

Q

Qualified high-deductible health plan (QHDHP) — A health insurance plan with a minimum deductible that must be met before the health plan begins to pay. The minimum deductible for a plan to be categorized as a QHDHP varies each year as determined by the Internal Revenue Code (IRS). Being covered by a QHDHP is also a requirement for having a health savings account.

Qualifying life event — A change in your life that can make you eligible for a Special Enrollment Period to enroll in health coverage. Qualifying life events include, but are not limited to, moving to a new state, certain changes in your income, and changes in your family size (for example, if you marry, divorce, or have a baby), and gaining membership in a federally recognized tribe or status as an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder.

Qualified medical expense — A qualified medical expense is one for medical care as defined by Internal Revenue Code (IRS) Section 213(d). The expenses must be primarily to alleviate or prevent a physical or mental defect or illness, including dental and vision. (Refer to IRS Publications 502 “Medical and Dental Expenses” and 969 “Health Savings Accounts and Other Tax-Favored Health Plans” for more information on qualified medical expenses on the U.S. Department of Treasury website at www.treasury.gov).

R

Rate — A rate is a base price for health benefits. It is sometimes confused with a premium. A premium is the specific amount changed to covered groups and individuals. Depending on a number of different variables, actual premiums for covered individuals and groups may be higher or lower than a fixed rate.

Reinsurance — A reimbursement system that protects insurers from very high claims. It usually involves a third party paying part of an insurance company's claims once they pass a certain amount. Reinsurance is a way to stabilize an insurance market and make coverage more available and affordable.

S

Special enrollment period — A time outside the Open Enrollment Period during which you and your family have a right to sign up for health coverage. In the Federally-Facilitated Exchange, you qualify for a Special Enrollment Period for 60 days following certain life events that involve a change in family status (for example, marriage or birth of a child) or loss of other health coverage. Job-based plans must provide a Special Enrollment Period of 30 days.

Summary of Benefits and Coverage (SBC) — A concise document detailing, in plain language, simple and consistent information about insurance coverage. The SBC helps consumers better understand the coverage they have and allows them to easily compare different coverage options. It summarizes the key features of the plan.

T

Tax credits for families — Tax credits to help the middle class afford insurance will become available for those with income between 100 and 400 percent of the poverty line who are not eligible for other affordable coverage.

V

W

Waiting period — The period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective. Any eligibility conditions that are based solely on the lapse of a time period are allowed, but not for more than 90 days.